Court Affirms Dismissal of Verizon Pension Risk Transfer Suit
An appellate court ruled that the decisions to amend the plan and transfer certain assets to an annuity contract were settlor, not fiduciary, functions.
The 5th U.S. Circuit Court of Appeals has affirmed dismissal of a class-action lawsuit that arose from the decision by Verizon Communications in October 2012 to purchase a single premium group annuity contract from The Prudential Insurance Company of America to settle approximately $7.4 billion of Verizon’s pension plan liabilities.
The case includes two classes of pension plan participants: those whose benefit liabilities were transferred to Prudential and those whose liabilities remained in the plan. The appellate court agreed with the dismissal of claims of the non-transferee class by a district court because the class did not prove individual harm and, therefore, lacked standing to sue.
Plaintiffs in the transferee class argued that the Verizon defendants violated their duties under the Employee Retirement Income Security Act (ERISA) in part because summary plan descriptions (SPDs) prior to the plan amendment providing for the transfer to Prudential did not disclose the possibility that benefit obligations could be transferred to an insurance-company annuity absent a plan termination or spin-off/merger. The 5th Circuit found that argument lacked merit in light of its precedent, which holds that ERISA does not require SPDs to describe future terms, and statutory language requires only retrospective notice of plan amendments. In its opinion, the court noted that ERISA only requires that administrators provide a summary of material modification or change “not later than 210 days after the end of the plan year in which the change is adopted.”
The court found that the plan fiduciaries provided notice shortly after the amendment’s adoption, well within the time limits imposed for notice of plan amendment. It also noted that the pre-amendment SPDs advised participants of Verizon’s reservation of the right to amend the plan, and the possibility that an amendment might affect their rights under the plan.
NEXT: The decision to transfer was a settlor function
The transferee class alleged Verizon defendants’ made several breaches of fiduciary duties under ERISA §404(a)(1)(A), which requires that plan fiduciaries use plan assets “for the exclusive purpose of providing benefits” and “defraying reasonable expenses of administering the plan.” The appellate court noted that actions by a plan sponsor “to modify, amend or terminate the plan” are outside the scope of fiduciary duties; “such decisions are those of a trust settlor, not a fiduciary.”
The 5th Circuit cited a U.S. Supreme Court decision in Hughes Aircraft Co. v. Jacobson, in which the Supreme Court said, “[i]n general, an employer’s decision to amend a pension plan concerns the composition or design of the plan itself and does not implicate the employer’s fiduciary duties which consist of such actions as the administration of the plan’s assets,” as well as decisions “regarding the form or structure of the plan.” The appellate court held the annuity amendment was a sponsor function of plan design, authorized under ERISA through its provision governing the purchase of annuities by plan fiduciaries. ERISA and related regulations authorize annuity purchases, and do not prohibit such purchases during an ongoing plan; and even assuming ERISA prohibits annuity purchases during an ongoing plan, the plaintiffs cite no authority that the prohibition’s violation would subject an otherwise settlor function to fiduciary requirements, the court said.
The transferee class also asserted that plan fiduciaries should have obtained their consent before transferring the pension obligations to the annuity contract, but the 5th Circuit found that assertion is neither supported by the terms of ERISA, which itself contains no such requirement for consent, either in the provisions detailing fiduciary duties, or in the provisions governing ERISA-compliant annuity purchases.
NEXT: No interference of benefits or excessive fees
In its complaint, the transferee class argued that a loss of benefits encompasses federal protections under ERISA and the Pension Benefit Guaranty Corporation (PBGC). But, the court said they provided no authority supporting the inclusion of ERISA and PBGC protections as “benefits” within the meaning of ERISA § 102. “Countenancing against Appellants’ argument, this interpretation of “benefits” is more expansive than the ERISA regulation governing the purchase of annuities by plan fiduciaries (“Annuitization Regulation”), which requires that such transactions guarantee a participant’s “entire benefit rights,” the court wrote. It said that, by failing to allege a viable right with which the amendment interfered, the plaintiffs failed to state a claim.
Finally, addressing the $1 billion in fees Verizon paid for the annuity purchase, the court found Verizon did not violate a duty to make sure the fee was reasonable. “Although the allegations enumerate various expenses associated with the implementation of Verizon’s decision as settlor, they wholly fail to address how those expenses are not reasonable expenses which are payable by the plan,” the court wrote. “In light of the $7.5 billion in attendant obligations, we will not conclude that this allegation alone is sufficient to support unreasonableness under our pleading standards.”
Nationwide has named Ben Hoecherl the
new leader of Nationwide ProAccount, the firm’s managed account service
designed to make institutional-quality investing available to retirement plan
participants. Hoecherl’s responsibilities include directing long-term strategy,
operations and sales for ProAccount.
Hoecherl served most recently as the manager of product management
and development at Advised Assets Group, focusing on the professional asset
management program offered through Empower Retirement plans. He has previous experience
in investment research and portfolio construction methodology.
Hoecherl holds a bachelor’s degree in finance and business from
the University of Utah and a master’s degree in business administration from
Regis University in Denver. He holds the Chartered Financial Analyst (CFA)
designation as well as his FINRA Series 65 license.
Nationwide reports that more than 100,000 plan participants use
the ProAccount service, totaling more than $3.6 billion in assets under
management.
NEXT: Moves at Mercer Investments
Jordan Nault has been promoted to global
leader of Mercer Investments’ hedge fund boutique.
Nault, who has been with Mercer since 2006, has experience as a
senior investment consultant and has worked with a wide variety of
institutional clients. She has served as the chair of the
target-date fund (TDF) strategic research team since 2012 and was instrumental
in developing a process to support TDF research coverage. She is also a member
of the alternatives strategic research team and defined contribution committee,
where she has been actively involved in leading Mercer’s research in liquid
alternatives.
Nault began her career at Mercer in New York and relocated to
Chicago to pursue her master’s degree. She will remain in Chicago, where she is
currently based, and report to Deb Clarke, global head of
investment research at Mercer Investments.
Nault holds a bachelor’s degree in Russian and Eastern European
studies from the University of Michigan, and a master’s degree in business
administration from the University of Chicago Booth School of Business.
Mercer also announced the appointment of Ben Thorndike as
North America alternative investments leader. He is responsible for marketing
and sales in North America for Mercer’s private equity, private debt, hedge
funds, real estate and infrastructure research, advice and delegated solutions.
Previously, Thorndike was with FOC Partners and prior to that role, he held
positions with HGGC (formerly Huntsman Gay Global Capital) and Bain Capital.
Thorndike has more than 30 years’ investment experience.
Thorndike, based in Boston, reports to Troy Saharic,
regional sales leader for Mercer Investments in North America. He holds a
bachelor’s degree from Colby College. He is a Chartered Financial Analyst (CFA)
and a Chartered Investment Counselor.
NEXT: John Hancock promotes Courtney Anderson.
Courtney Anderson has been promoted to regional
vice president, responsible for sales and relationship development with
financial representatives and plan consultants in the northeast division
of John Hancock Retirement Plan Services (JHRPS). Her focus
will be upstate New York.
Anderson has served John Hancock RPS in the territory for more
than 11 years, most recently as a relationship manager. She reports to Ray
Hemstreet, divisional vice president of the northeast division.
Anderson holds a bachelor’s degree in management from St. John
Fisher College, as well as FINRA Series 6, 7 and 63 licenses. She also holds
state insurance licenses in New York and the Accredited Pension Representative
(APR) designation from the National Institute of Pension Administrators.
NEXT: Anthony Perkins joins LPL in product development.
Anthony Perkins has been hired as executive vice
president of technology product development, a newly created role at LPL
Financial LLC.
Perkins will report to Victor Fetter, managing
director, chief information officer, who cites Perkins’ extensive information
technology experience in the financial services industry and deep understanding
of the wealth management environment.
Perkins will be responsible for the oversight of the analysis,
design, development and delivery of technology product solutions, including
adviser-facing technology offerings and corporate solutions, and the continued
evolution of LPL’s ClientWorks platform.
Perkins will also support LPL’s investments in advanced data
analytics, the development of additional mobile platforms and the firm’s
ongoing efforts to consistently deliver technology solutions to each of its
business channels.
Before coming to LPL, Perkins was the chief technology officer of
Wells Fargo Advisors, responsible for all front office and adviser-facing
applications. He has also held leadership positions at major financial services
firms, including Bank of New York Mellon, Morgan Stanley and HSBC.
Perkins holds a bachelor’s degree in history from Chapman
University and his FINRA series 99 license.
NEXT: WealthPath Joins Pensionmark Financial
WealthPath Investment Advisors has joined Pensionmark
Financial Group. The affiliation is the first office in the Arkansas and
Oklahoma regions for Pensionmark. The partnership will provide WealthPath the
infrastructure to grow and expand its service offerings. WealthPath clients
will continue to receive personalized and unbiased retirement plan and
investment guidance. The entire WealthPath team will be joining Pensionmark,
including partners Jim Mote, Jim Edmiaston, Erik
Berry, Brent Harless and Clay Kendall, who cited the Pensionmark
culture as a good fit for WealthPath’s business model and client care focus.
The WealthPath team brings its industry experience to
Pensionmark, including advising some of the region’s premiere retirement plans
and hundreds of individual clients. WealthPath also has a 15-year track record
of managing portfolios for clients and will be bringing their proprietary
risk-based asset-allocation models to the Pensionmark network of advisers.
“The additional services and features that Pensionmark offers to
both individuals and retirement plans are exceptional, and we are excited to
begin integrating these tools into our current practice,” Edmiaston said in
a statement.
NEXT: The Standard puts Joel Mee in West Coast sales.
Joel Mee will support The Standard’s
advisers in Orange, San Diego, San Bernardino and Riverside counties in
Southern California. He will also cover Las Vegas, Arizona and New Mexico. He
will be based in the firm’s sales office in Irvine, California.
Mee has more than 25 years of experience in financial services and
retirement plans. For the past several years, he has held various sales
management roles within The Standard’s retirement plans division, including,
most recently, director of business development.
“With his expertise in retirement plan sales strategy, adviser
practice management, marketing and communications, Joel will enhance the
service and support we’re able to provide to our advisers in the region,”
said Rob Baumgarten, regional sales director for The Standard’s
West Sales Region. “We are thrilled to have him join our West sales team.”
Mee holds a bachelor’s of science degree in business from Montana
State University. He holds the FINRA Series 6, 63 and 65 securities licenses.
He has also attained the Certified Pension Consultant, Qualified Plan Financial
Consultant, Qualified Pension Administrator and Qualified 401(k) Administrator
designations.
NEXT: MassMutual adds eight sales reps to support advisers and plans.
MassMutual Retirement Services has added eight new sales
representatives—six new managing directors and two new business development
managers—to support financial advisers as they serve the needs of plan sponsors
in the emerging, institutional and employee benefits marketplaces. Managing
directors train and educate advisers about MassMutual’s retirement plan
products and services, identify retirement plan prospects, and promote
MassMutual and its retirement products. Business development managers partner
with managing directors and benefit agencies that sell MassMutual worksite
insurance products.
The new managing directors and their territories are:
Scott Adams supports institutional markets
and works with Emerging Markets Managing Director Jasonn Potter,
covering the Rocky Mountain Region of Arizona, Colorado, New Mexico, Utah and
Wyoming. Adams reports to Tanya Jones, western division sales
manager, and previously was a vice president of sales for Lockton Retirement
Services. Adams has 18 years of experience supporting retirement plans. He
holds a bachelor’s degree in business administration from Western State College
as well as the Certified Employee Benefit Specialist (CEBS) and Accredited
Investment Fiduciary (AIF) designations.
Joe Amaya partners with Institutional
Markets Managing Director Daniel Darby
and will support emerging market sales for Western Michigan. Amaya
reports to Bill Hicks, mid-Atlantic division
sales manager. Previously, Amaya was regional vice president for John Hancock
in Milwaukee. He holds a bachelor’s degree from Arizona State University as
well as his FINRA Series 7 and 63 registrations. Amaya is based in Grand Rapids,
Michigan.
NEXT: MassMutual’s
managing directors in the Northeast, Pacific Northwest and West.
Marc Doucette reports to Brian Sweeney,
Northeast division sales manager. Doucette will partner with Emerging Markets
Managing Directors Rod Toppin, Will Deyoung, John Cunningham and Scott
Littlewood, and will support institutional market plan sales for
Connecticut, western Massachusetts, Vermont and upstate New York. Doucette
is a 20-year veteran of Prudential Retirement and CIGNA. Doucette holds a
bachelor’s degree from Central Connecticut State University as well as his FINRA
Series 7, 26 and 63 registrations. He is based in Glastonbury, Connecticut.
David Eliopulos will partner with Institutional
Markets Managing Director Molly Knapp and will support
emerging market plan sales for Oregon and Vancouver, Washington. Eliopulos
reports to Frank Bruno, Western division sales manager. Previously,
Eliopulos was regional sales director for Paychex. He holds a bachelor’s
degree from University of San Diego as well as his FINRA Series 6 and 63
registrations. He is based in Bend, Oregon.
J.T. Gallinaro reports to Brian Robb, Southwest division sales manager, and will partner with
Institutional Markets Managing Director Jenny
Dodson, supporting emerging market sales for independent financial advisers
and benefit agents in greater Houston. Gallinaro previously held positions at
Lincoln Financial and John Hancock in the retirement plan services
groups. He holds a bachelor’s of science degree in business administration
from Villanova University as well as his FINRA Series 7 and 63 registrations.
Thad Letzer also reports to Bruno. He
partners with Institutional Markets Managing Director Francesca Messano, and will support emerging market sales for
eastern Los Angeles. Letzer was most recently the regional sales director for Paychex.
He holds a bachelor’s degree from California State at Northridge as well as his
FINRA Series 6 and 63 registrations. He is based in Los Angeles.
NEXT: MassMutual
names new business development managers and territories.
Rob Dziema was
named business development manager for the central division, covering Iowa,
Kansas, Illinois, Indiana, Michigan (upper peninsula), Minnesota, Missouri,
Montana, Nebraska, North Dakota, South Dakota and Wisconsin. Dziema, who
previously served on MassMutual retirement services sales desk, has 16 years of
experience in financial services. He reports to Derek Fuller, Central Division Sales Manager. Dziema holds a
bachelor’s of science degree from Marist College as well as his FINRA Series 6,
26 and 63 registrations.
Raul Vargas will
support four managing directors in Florida and covers Alabama, Florida,
Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee and
West Virginia. He reports to Jason
Roper, southern division sales manager. Vargas has been with MassMutual
since 2012, serving the Florida market as a retirement education specialist and
has 13 years of experience in financial services. Vargas holds two
bachelor’s degrees from Florida Atlantic University and a master’s degree in
business administration from American Intercontinental University. He
holds his FINRA Series 7 and 63 registrations, and the Certified Retirement
Counselor designation. He is based in Orlando, Florida.
NEXT: Fiduciary Investment Advisors expands manager research team.
Andrea McAndrew has been hired by Fiduciary
Investment Advisors LLC (FIA) as a research analyst.
In a statement, the firm cited her significant manager research
experience in a family office as well as an endowment setting.
“Manager research continues to be one of our true differentiators
and, with over ten years of experience reviewing investment portfolios, Andrea
represents a significant addition to the team,” Mark Wetzel, president of FIA, said in a statement.
McAndrew has more than 15 years of investment experience,
previously as a managing director at Alpha Capital Research, where she managed
portfolios of hedge funds. Before Alpha Capital, she was an endowment
administrator at Choate Rosemary Hall, responsible for compliance and
administration at ARA Portfolio Management.
McAndrew holds a bachelor’s degree from Lehigh University as well as the
Chartered Financial Analyst (CFA) designation.